betting on horse races vs. trading

[Thunderdog]

Quote from gnome:

That's your definition, not mine.... and while I don't know which (if either) is the correct and "official" definition, I chose to regard yours as incomplete.

I'll offer one more example, then I'll be done...

The life insurance business. Does that seem a "gamble"? The insurance company charges a premium significantly in excess of the probability of the insured dying... yet, there is "risk of loss" and "uncertainty of outcome" regarding each insured.

I'd say it's a very good gamble! Remember that each underwritten life insurance policy is an obvious "gamble" even by your definition, but with the pricing based on carefully compiled acturarial tables and the law of large numbers, the overall uncertainty (risk of net loss) of the aggregate policies is very low. And that's a heck of a good bet! The clients are taking the other side of that bet because they do not have the luxury of large numbers which serve to substantially mitigate the insurer's risk.

We're going in circles here, gnome. I perfectly understand where you are coming from. We just seem to be attaching different biases to certain words.

 

[trendo]

Quote from gnome:



The life insurance business. Does that seem a "gamble"? The insurance company charges a premium significantly in excess of the probability of the insured dying... yet, there is "risk of loss" and "uncertainty of outcome" regarding each insured.

I think it was George Carlin who said, "Life insurance is a bet that you hope you lose."

 

[gnome]

I said I was done, but I thought of one more thing... a biggie.

Most people would regard playing poker as "gambling", yet in a famous Texas State Supreme Court decision... there was a ruling that poker is NOT gambling...

 

[Thunderdog]

Quote from gnome:

I said I was done, but I thought of one more thing... a biggie.

Most people would regard playing poker as "gambling", yet in a famous Texas Supreme Court decision... there was a ruling that poker is NOT gambling...

Was it not also a Supreme Court that effectively "appointed" GWB president?

 

[robbie380]

Quote from gnome:

I'll offer one more example, then I'll be done...

The life insurance business. Does that seem a "gamble"? The insurance company charges a premium significantly in excess of the probability of the insured dying... yet, there is "risk of loss" and "uncertainty of outcome" regarding each insured.

I don't now nor have I ever regarded trading as gambling.

I am in your boat on this subject gnome but with this example I guess the gamble would be that some sort of plague or attack doesn't wipe out a chunk of your consumer base forcing the insurer to payout a ton. ...or in a more relevent case...jpm being forced to shell out hundreds of billions to pay out the debt swaps if a string of major bankruptcies happened.

 

[Thunderdog]

Quote from dtrader98:

... Ralph vince once said, "In a negative expectation game, there is no money-management scheme that will make you a winner."

It's hard to argue with that logic. However, generally speaking, Vince is fairly misguided. His Optimal f position sizing formula can assume some fairly aggressive position sizing based on a child-like belief in, and acceptance of, a non-existent probability distribution. Basing potentially aggressive trading on such numeric specificity is liable to get you Optimally F'ed. Therefore, even a so-called positive expectancy model can become a bad gamble if you trade too large because you commensurately remove the benefit of the law of large numbers which provide cushion for unexpected outcomes.

 

[ElCubano]

Quote from robbie380:

I am in your boat on this subject gnome but with this example I guess the gamble would be that some sort of plague or attack doesn't wipe out a chunk of your consumer base forcing the insurer to payout a ton. ...or in a more relevent case...jpm being forced to shell out hundreds of billions to pay out the debt swaps if a string of major bankruptcies happened.

some Insurers not insuring homes in florida anymore after they get spanked....wasn't it supposed to have a positive expectancy; if so why don't they take the trade any longer ???

I get what you are saying ; but in the end...gambling is betting on an unknown outcome...you can slice it, dice it any way you want....but thats the definition of Gambling...which is what we are talking about.....just cuz you strung together a 100 miilion dollars in trades doesnt change that...peace

 

[gnome]

Quote from robbie380:

I am in your boat on this subject gnome but with this example I guess the gamble would be that some sort of plague or attack doesn't wipe out a chunk of your consumer base forcing the insurer to payout a ton. ...or in a more relevent case...jpm being forced to shell out hundreds of billions to pay out the debt swaps if a string of major bankruptcies happened.

1. Most life insurance includes a Force Majeure clause, and

2. Insurance companies know they need to diversify geographically to reduce such possibilities.

As far as "investments gone sour"... they are almost always conservative due to the guarantees they have to make.

 

[ElCubano]

Quote from gnome:

2. Insurance companies know they need to diversify geographically to reduce such possibilities.

or they have the option of F**king the little guy by increasing premiums. Thats not a very good example....If i could take the money off the table when a trade goes sour or change my entry price.....shit i'd be in heaven...

 

[gnome]

Quote from ElCubano:

some Insurers not insuring homes in florida anymore after they get spanked....wasn't it supposed to have a positive expectancy; if so why don't they take the trade any longer ???

Insurance companies misread risk-reward and so mis-priced the premium.

Many companies don't insure in Florida now because they believe they can't properly evaluate and price the risk. Some other companies may, but think their Florida business is a small enough percentage of their overall exposure that they can afford the possibility of what amounts to outsized losses.